A Golden Nugget Merger Is Not In The Cards, Says Caesars

Last week, sources reported that Tilman Fertitta, the billionaire behind Golden Nugget, was interested in merging his casino interests with Caesars Entertainment.

Now, according to the New York Post, Caesars is planning to reject any such ideas from the Texas-based mogul.

Fertitta is the sole owner of the Golden Nugget chain of casino-hotels. He also owns numerous restaurants under the Landry’s brand and the NBA’s Houston Rockets.

Sources close to the Caesars board fear that a merger would lay too much debt upon the casino giant. Caesars is still managing $9 billion in debt since its emergence from bankruptcy last year.

The assumption of debt was part of what led the company into bankruptcy in the first place. The leveraged buyout that investment firms Apollo Management and TPG executed to acquire the company included shouldering $25 billion in obligations.

Caesars is already working on a big deal

Of course, it’s possible that Fertitta’s overtures were doomed from the start. And ironically, Fertitta might have another NBA team owner to blame for the failure.

Caesars is in the process of acquiring several casino properties from Midwestern casino chain JACK Entertainment. Dan Gilbert, the billionaire owner of the Cleveland Cavaliers, is the primary owner of JACK’s assets.

Those assets include casino properties in Ohio, Maryland, and Michigan. The company also owns a racino in Ohio and a racetrack in Kentucky.

Caesars’s bid to acquire the properties will likely extend past the $1 billion price tag. However, the acquisition will give Caesars key holdings in states that do not have a Caesars footprint.

That footprint is especially important to have in Ohio. It is quite possible that Ohio will become have legal sports betting within a year or two.

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The AC casino merger that was not to be

Since a deal with Fertitta will not come to pass, the only lasting effect that the talks will have are on Caesars’ stock price. The news of the merger caused the casino company’s stock to rise 18 percent in two days.

However, the NY Post speculates that the leak about the merger is the result of some of Caesars’ lesser shareholders.

“I think some people are hoping this puts JACK’s on hold,” the source told the Post.

Both Apollo Management and TPG are in a position to steer the direction of the company. However, minority owners such as Canyon Partners (10 percent stake) and HG Vora Capital (4.9 percent stake) might have concerns about the assumption of any major debt so soon after the company emerged from bankruptcy.

Perhaps the company is gun shy after the aforementioned massive bankruptcy filing.

However, Caesars is always willing to shift things around and reorganize, so adding another piece to the puzzle may not be as complex as it sounds if it were to happen.

About the Author

Bart Shirley

Bart Shirley is a writer who covers the NJ online gambling industry as well as a poker player from Houston, Texas. He has a master's degree in business administration from Texas Christian University and a degree in English from Texas A&M. In his spare time, Bart teaches math and business at Memorial High School in Houston.